Buying Your First Home in Australia: A Complete Guide

Getting started: the deposit and borrowing power

The two numbers that determine whether you can buy a home are your deposit and your borrowing power. Understanding both before you start seriously searching saves time and prevents disappointment.

Your deposit is the cash you contribute toward the purchase price. Most lenders require at least 20% to avoid Lenders Mortgage Insurance (LMI). On a $700,000 property, that is $140,000. First-home buyers who cannot reach 20% can use the First Home Guarantee (see below) to buy with as little as 5% without paying LMI.

Your borrowing power is how much a bank will lend you based on your income, expenses, existing debts, and credit history. Lenders apply a serviceability buffer (currently 3% above the loan rate), to ensure you can afford repayments if rates rise. Your borrowing power determines your maximum purchase price: deposit plus borrowing power equals your budget.

The real upfront costs

Most first-home buyers focus on the deposit, but the full list of upfront costs is significantly larger. Budgeting only for the deposit is the most common and expensive mistake first-home buyers make.

• Stamp duty. A state government tax on property transfers. First-home buyers receive concessions in every state, but above certain thresholds, stamp duty can add tens of thousands of dollars to the purchase cost. Use the Stamp Duty Calculator for the exact figure in your state.
• Conveyancing fees. A licensed conveyancer or solicitor handles the legal transfer of ownership. Typical fees range from $800 to $2,500 depending on complexity and state. This should be non-negotiable, do not buy without one.
• Building and pest inspection. For houses and townhouses: $400–$800 combined. Essential before signing a contract. A serious structural or pest issue found post-purchase can cost tens of thousands of dollars.
• Strata reports (for apartments): $150–$400. Shows the financial health, maintenance history, and pending levies of the body corporate. A poorly managed strata with large upcoming special levies can be a significant hidden liability.
• Lenders Mortgage Insurance (LMI). Applies when the deposit is below 20%. Typically 1–3% of the loan amount, added to the loan balance. Avoidable via the First Home Guarantee or by reaching a 20% deposit.
• Loan establishment and settlement fees. Application fees, valuation fees, and settlement agent fees. Variable by lender, can be $300–$1,000 or waived by some lenders.
• Moving costs. $500–$3,000 depending on distance and volume. Easy to underestimate for a family home.

A practical rule: budget an additional 4–6% of the purchase price for these transaction costs beyond the deposit. On a $650,000 home, that is $26,000–$39,000 in additional costs that need to be available at settlement.

Government schemes for first-home buyers

First Home Guarantee (formerly FHLDS)

The First Home Guarantee allows eligible first-home buyers to purchase with a 5% deposit, with the federal government guaranteeing the remaining 15% to the lender. This means you avoid paying LMI entirely while buying with a smaller deposit. Places are limited and income thresholds apply, $125,000 for singles, $200,000 for couples (FY2024–25 figures; check Housing Australia for current thresholds).

The scheme is administered through participating lenders only and has property price caps that vary by state and region. Not every lender offers the scheme, so it is worth checking the Housing Australia website for the current participating lender list.

First Home Super Saver (FHSS) Scheme

The FHSS scheme lets you save for a deposit inside your super fund, where voluntary contributions are taxed at a maximum of 15% instead of your marginal income tax rate. You can contribute up to $15,000 per financial year in voluntary contributions and withdraw up to $50,000 total (plus associated earnings) for a first home purchase.

At a 30% marginal rate, using the FHSS scheme instead of after-tax savings to accumulate $50,000 saves approximately $7,500 in tax on the way in, plus concessional returns on the balance. The scheme is best suited to buyers with a 2–5 year deposit savings horizon and an income above $45,000.

First Home Owner Grant (FHOG)

Each state and territory administers its own First Home Owner Grant for new or substantially renovated properties. Grants range from $10,000 to $30,000 depending on the state and may have property value caps. The FHOG generally applies to new builds only, most existing properties do not qualify. Check your state revenue office for current eligibility.

Home loan basics

Variable vs fixed rate loans

Variable rate loans move with the RBA cash rate and lender decisions. They typically offer more flexibility (offset accounts, redraw, extra repayments without penalty), but your repayments can change. Fixed rate loans lock in a rate for a set term (1–5 years), offering certainty but usually with restrictions on extra repayments and limited or no offset functionality.

Many first-home buyers use a split loan: fixing a portion of the loan for rate certainty while keeping the rest variable with offset access. This balances stability against flexibility.

Offset accounts

A mortgage offset account reduces the interest-bearing balance of your loan. Every dollar sitting in the offset account saves your mortgage interest rate, tax-free. This is typically a better return than keeping cash in a savings account (where interest is taxed). For first-home buyers, parking your emergency fund and short-term savings in an offset account reduces mortgage interest from day one.

See the offset vs redraw guide and the HISA vs offset comparison for a full breakdown.

Getting pre-approval

Pre-approval (also called conditional approval or approval in principle) confirms that a lender is willing to lend you a specified amount, subject to valuation and final checks. It is valid for 3–6 months and gives you confidence when making offers, letting agents and vendors know you are a serious buyer.

Pre-approval is not a guarantee, lenders still conduct a full assessment on the specific property. But buying at auction without pre-approval in hand is high-risk: contracts are unconditional and binding from the fall of the hammer.

What happens at settlement

Settlement is the legal transfer of property ownership. Your conveyancer handles the process, coordinating with the seller's conveyancer, the lenders, and the relevant government offices (for title registration and stamp duty payment).

On settlement day:

• Your lender transfers the loan funds to the seller's account
• Stamp duty is paid to the state revenue office (or was pre-paid at exchange in some states)
• Title is transferred to you and registered with the land titles office
• You receive the keys

Ensure your home and contents insurance is in place from settlement day, coverage is your responsibility from the moment title transfers.

Keeping an emergency fund after buying

Depleting your entire savings account to reach the deposit is a common and dangerous mistake. Homeownership introduces new financial responsibilities (rates, insurance, maintenance), and the first year often brings unexpected costs. Aim to maintain at least two to three months of expenses in accessible savings after settlement, separate from your offset account.

A new homeowner without an emergency fund who encounters a hot water system failure, a roof leak, or a temporary income disruption in the first year may have no option but expensive credit. The emergency fund guide covers how to size and structure your cash buffer as a homeowner.

Common mistakes first-home buyers make

Borrowing to the maximum

Borrowing the maximum the bank will lend leaves no buffer for rate increases, income changes, or life events. A more conservative approach is to borrow at a level where repayments remain comfortable at rates 2–3% above current levels, not just at today's rate.

Skipping the building inspection

A $500 building inspection that identifies $30,000 in structural issues pays for itself many times over. Many first-home buyers skip inspections in competitive markets to move fast. In most states, a standard contract includes a cooling-off period or due diligence clause that allows an inspection before committing.

Not having legal review before signing

A contract of sale is a legally binding document. Review by your conveyancer before exchange is not optional. Special conditions, inclusions and exclusions, settlement timing, and easements can all affect the value or suitability of the property significantly.

Underestimating the ongoing costs

Council rates, water rates, insurance, strata levies, and maintenance costs can add $5,000–$15,000 per year beyond the mortgage repayment. Budget for these before committing to a purchase price, not after.

Choosing the wrong loan structure from the start

Interest-only loans reduce repayments short-term but do not build equity. Choosing an interest-only loan as a first-home buyer, rather than a principal-and-interest loan, delays equity accumulation and usually costs more over the full loan life. Similarly, choosing a lender based purely on current rate without considering fees, offset account quality, and redraw flexibility can cost significantly more over a 30-year loan.

Frequently asked questions